Investors looking for companies that can deliver superior results should take a close look at Clorox Co. (CLX, Financial), a winner in both good times and bad times.
On Monday, the company reported strong financial results, sending its shares up 4.24%.
Fueled by the pandemic, Clorox has been riding on strong demand for its cleaning and disinfecting products. In fact, business is so good that the company is striving to catch up with demand by adding capacity and hiring third-party manufacturers.
Wall Street has taken notice, making Clorox's stock a big winner of the pandemic economy.
Demand for Clorox's products was strong even before the pandemic, helping the company achieve strong financial performance—see table.
| Annual Rates (per share) | 10 yrs | 5 yrs | 12 months |
| Revenue Growth (%) | 3.00 | 4.00 | 10 |
| EBITDA Growth (%) | 4.20 | 4.20 | 14.40 |
| Operating Income Growth (%) | 3.60 | 4.50 | 15.80 |
| EPS without NRI Growth (%) | 9.30 | 9.90 | 16.50 |
| Free Cash Flow Growth (%) | 8.10 | 12.00 | 67.10 |
Source: GuruFocus.
Clorox's solid financial performance can be attributed to a number of factors. One of them is the nature of its businesses. The company manufactures and distributes mostly cleaning and wellness products, items that consumers buy in good and bad times.
Then there's corporate entrepreneurship— the leveraging of core competencies to discover, develop and manufacture innovative products and become a diversified consumer and wellness products company. In the early 1900s, the Electro-Alkaline Co. (later renamed The Clorox Co.) was making one product: bleach. Now, the company still makes bleach, but it's only a small fraction of its sales, with the rest coming from other products like Formula 409, Liquid-Plumr, Pine-Sol and Tilex and water-filtration systems under the Brita brand.
Clorox's "creative destruction—" the transformation from a bleach manufacturer more than a century ago to a diversified consumer and wellness products company today, has enhanced shareholder value nicely. The company has delivered better returns to its stockholders than Procter & Gamble (PG, Financial) (P&G acquired Clorox briefly back in the 1950s, but was forced by regulators to divest it).
And there's effective capital management, as measured by the excess return on capital, which is the difference between the return on invested capital and the weighted average cost of capital—see table.
| Company | ROIC | WACC | EROC |
| Clorox | 21.65% | 2.57% | 19.08% |
| P&G | 13.23 | 3.41 | 9.82 |
Source: Compiled from GuruFocus.
While the past performance of a stock is never a guarantee for its future performance, it is a good indicator of Clorox's ability to adapt to an ever-changing market environment and withstand market selloffs.
That's why Clorox is a good choice for conservative investment portfolios beyond the Covid-19 economy.
Disclosure: I own shares of Clorox.
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